Steel prices eye a rebound on lower-than-expected China inflation and infrastructure boost

Steel prices remained in a negative trajectory for a tad longer period as Chinese steel mill owners halted the production process to scale down their expenses due to already unsold inventories. The metal prices are expected to display a stellar recovery as the Chinese administration is announcing stimulus packages to boost infrastructure spending.

Earlier, the headwinds of a resurgence in Covid-19, environmental issues due to steel production smelters, a slowdown in the real estate sector, and the arrival of monsoon season in various provinces of China and other parts of Asia had restricted the steel demand. As slowdown worries have reached the rooftop, the Chinese administration has announced significant stimulus packages to scale down the former.

In addition to the $44 billion stimulus announced at June end, the administration has publicized another $4 billion in quotas for infrastructure spending. As the projected infrastructure spending will kick-start, prices of steel will witness a decent buying interest.

Meanwhile, the Chinese economy has come out with a decline in inflation numbers. China’s Consumer Price Index (CPI) has landed at 2.5%, lower than the expectations and the prior release of 2.8% and 2.7% respectively on an annual basis. While the monthly figure is negative by 0.1% against 0.2% of expectations and 0.5% of former release.

A decline in China’s inflation will force the People’s Bank of China (PBOC) to sound dovish and trim the Prime Lending Rate (PLR) further. And, more liquidity flush into the economy will spurt the volumes in economic activities, which will eventually improve the steel demand vigorously.